Wednesday, November 10, 2010

Solar stocks getting no respect

The solar sector has recovered from a nasty first half of 2010, with many shares up 30% from the lows of the year.

But the sector is still getting no respect--even as some companies post very impressive numbers. I continue to like SPWR and MEMC as I believe analysts/investors are not giving them credit for their power plant construction businesses. At $13.8/sh and $12.60/sh respectively, neither stock is getting credit for getting about 70% of its year's earnings in the last quarter of the year. With SPWR ready to report Q3 earnings tomorrow, I will be listening closely to information about Q4 when SPWR is estimated to earn over $1/sh. Depending on how Q4 turns out SPWR should make $1.30-$1.60/share in 2010. So with about 7 weeks to go in the year it is trading at a PE ~10.

Meanwhile a Chinese solar company LDK Solar--which I started watching about 15 weeks ago when they announced a MASSIVE lending facility from a Chinese state bank (worth ~$10 B)--announced earnings 2 days ago of 0.72/sh (well above the 0.43 estimate)...which along with the 0.36/sh they earned in the prior quarter puts them above $1/sh in just 6 months. LDK is predicted to earn another ~$1/sh in q4, bringing FY 2010 to ~$2/sh. LDK also raised 2011 revenue guidance by almost $1B. LDK stock is presently trading at ~$13/sh, meaning its 2010 P/E is about 6.5 despite soaring earnings and revenue.


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